Registering as a Dormant Company

In India, companies can register as a dormant company. This article will help you understand the features, eligibility and the process of registering a dormant company.

Any company whether it is a limited, private limited or a one person company has the option of registering itself as a dormant company and would be eligible to avail few exemptions which have been declared under mandatory compliances.

The status of a dormant company can be availed by enterprises that are registered to hold an intellectual property or an asset but do not have significant accounting transactions.

In this particular article, we will brief the process of registering as a dormant company in India and its benefits.

Features of a dormant company

When a corporation wants to declare itself inactive, it means:

1. When an organisation is dormant and is not involved in business or operations, or has not made very significant financial transactions during the last two consecutive years, or has not filed financial statements and annual returns for the last two consecutive fiscal years.
2. The term “significant accounting transaction” means any transaction other than the-

Therefore, any company which wishes to become an asset company without having any significant business transactions can apply to get the status of a dormant company.

Eligibility for the company to register as a dormant company

Any company whether limited, private limited or a one-person company can apply for declaring itself a dormant company only if the following criteria are met:

Process Flow for registration as a dormant company

To obtain the legal status of a dormant company, the following steps are to be followed:

Maintenance of Dormant company status

Dormant companies are mandatorily required to file a “Return of Dormant Company” at the end of each financial year before April 30^th with the Ministry of Corporate Affairs.

This return of dormant company should necessarily include detail of the financial position of that particular business which should be duly audited by a professional Chartered Accountant. This filing is done using Form MSC-3.

Return to the status of an active company

To restore the status of an active company, an application is required to be given to the Registrar in form MSC-4.

In case, the Registrar is satisfied with the same; then the company will be restored to its active status by issuing MSC-5.

Benefits of being a dormant company

Once any company is registered as a dormant company; the annual return for the company can be legally filed using a simplified form MSC-3.

Also, the total number of Board Meetings to be conducted by the Company reduces considerably and the compliance burden is lessened to a certain extent.

• Fees paid by the particular company to the Registrar;
• Payment done by the company in order to fulfil the requirements of this particular Act.
• Shares allotment with a view to fulfil the mandatory requirements of this Act.
• Payments accrued towards maintenance of the office and the records.

1. No inspection, investigation or inquiry has been ordered or carried out against the particular company.
2. There had been no prosecution that had been initiated against that particular company under any circumstances.
3. The concerned company should neither be having any nature of public deposits that are outstanding nor is the company in default in the payment with any business partners, parties, banks or financial institutions.
4. The company should not have any outstanding loan of any nature secured or unsecured.
5. There should not be any existing dispute in the company’s management or ownership of the company
6. The concerned company is not supposed to have any outstanding statutory dues, taxes or duties, etc. payable to the State Government or the Central Government or any apex local authorities.
7. The concerned company should not have any nature of  dues pertaining to its employees.
8. The concerned company is not supposed to have been listed in any of the stock exchanges within or outside of India.

• Resolution  of the Board
  The concerned company should first of all conduct a General Meeting of the Board and then eventually pass a special resolution for the application to convert into a dormant company or alternatively sending notice of the same to all the shareholders and then obtain the consent of at least ¾ of the total number of shareholders in order to go ahead.
   
• Filing Form MSC-1
  After the Board Resolution is over, the shareholders’ consents are known. If ¾ of the shareholders have given their consent on filing for dormancy, then the MSC-1 form has to be filed along with the requisite fees.
   
• Dormant company’s certificate
  If the Registrar is satisfied with the application filed by the concerned company, then a Certificate of Dormancy is issued to the company. All the necessary details of all the dormant companies in India are recorded and maintained by the Registrar and also published on the MCA website.